Cost of Holding Excess Reserves: The Indian Experience
AbstractMost of the existing literature has used single reserve adequacy measures to evaluate the volume of excess reserves. In this paper, we employ empirical methods to generate a comprehensive reserve adequacy measure, incorporating the various objectives of holding reserves, and compare the actual reserve accumulation experience of various emerging markets with the prediction of our empirical model. Using this comprehensive reserve adequacy measure, we calculate the cost of holding excess reserves for India by looking at three different alternative uses of resources. We find that India is foregoing as much as 2 of its GDP by accumulating reserves instead of employing resources in alternative uses.
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Bibliographic InfoPaper provided by Indian Council for Research on International Economic Relations, New Delhi, India in its series Indian Council for Research on International Economic Relations, New Delhi Working Papers with number 206.
Length: 30 Pages
Date of creation: Mar 2008
Date of revision:
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Reserve Holdings; Reserve Management;
Find related papers by JEL classification:
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-CBA-2008-06-07 (Central Banking)
- NEP-CWA-2008-06-07 (Central & Western Asia)
- NEP-DEV-2008-06-07 (Development)
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